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What you need to know (but are afraid to ask)

How to Buy

Steps for Buying

1. Getting a real estate agent

Developing a good relationship with a real estate agent who is interested in solving your housing problems is essential to a successful outcome.

2. Speak with a mortgage broker or banker

Manhattan sellers want only financially qualified buyers looking at their apartments. A New York City Mortgage Broker or Banker can tell you in a short amount of time exactly what you can spend for your new apartment, based on the financial profile you provide. There is no cost or obligation to you for this information. The mortgage broker/banker provides this service in the hope that you might do business with his/her firm.

3. Schedule appointments to look at properties

Scheduling in Manhattan can be difficult: Many buildings have restrictions on when apartments may be shown, and many owners insist that the broker be present for all showings. Being flexible in scheduling will give you more apartments from which to choose.

4. Make an offer

If you are interested in an apartment, discuss it with your broker and she/he will present your offer to the listing broker, who is obligated to inform the seller immediately. Remember, that in this HOT Manhattan real estate market, many apartments are sold for significantly more that the asking price! If it is accepted or a counteroffer is made that you accept, then the seller’s attorney will draft a contract of sale.

5. Contact and discuss every aspect of the proposed contract with a New York City real estate attorney

In New York City, attorneys are always used to buy and sell real estate. Brokers are not allowed by law to prepare contracts. but can give you a selection of attorneys to choose from. It is absolutely essential that you use an attorney who knows the New York City residential real estate laws, customs, and conventions for your protection and peace-of-mind.

6. Assemble your financial documentation, references, and complete the Board Package (Co-op).

Based on the particular building in which you are buying , your real estate broker will advise you about its documentation requirements. Most basic are proof of financial condition, income, as well as business and personal letters of reference.

7. Obtain financing

You may use whatever lending institution you choose to obtain a mortgage. The New York City banks and brokers are intimately familiar with the buildings and the process. Your real estate broker and attorney can assist you in the search, if you wish.

8. Meet with the Board of Directors (Co-op only) and wait for approval

Not all boards require an in-person interview, but your broker can help you prepare for it. The board is made up of tenant/shareholders who are elected by their peers. They are your potential neighbors as you are theirs. Confrontation and arrogance seldom, if ever, succeed in winning approval. The interviewer is to learn if they, and the other owners, will be at risk by approving your purchase.

9. Schedule closing

Closings involve the seller, buyer, attorneys, and brokers. Everything must be in order: checks properly drawn, financing in place, and everyone present.

10. Move in

Moving in involves a bit more than just deciding that the first of the month is a good time. Most buildings have restrictions on moving in (or out). Weekends are often off-limits, as are rush hours and lunch time.

Tax Savers

The following is some basic information on tax rules affecting buyers and sellers, from the National Association of Realtors.

Single homeowners can exclude the entire gain on the sale of a home up to $250,000. Married owners can exclude $500,000 if they file a joint return for the year, either spouse meets the ownership test, both meet the use test, and neither spouse is excluding a gain from the sale of another home after May 6,1997.

All homeowners must satisfy three tests. The Ownership test means the seller owned the home for at least two years of the five-year period before the closing date. The use test means the seller used the property as a principal residence for two years of that five-year period. And the waiting period test means the exclusion wasn’t used during the preceding two-year period. Further, sellers aren’t required to purchase a replacement residence as they were under the old law.

There’s no limit to the number of times the exclusion will apply. There’s no cumulative feature. For example, a married seller may exclude up to $500,000 of gain (250,000 if single) on each home sale over a lifetime, provided other requirements are met. Since Jan.1, 1998, gains from all capital assets held for more than 12 months are taxed at the rate of 20% (or 10% for taxpayers in the 15% tax bracket). If sellers qualify for the exclusion, the first $250,000 or $500,000 of the gain on the sale isn’t taxable. Any gain beyond those amounts is taxed at these capital gains rates and not at the higher, ordinary income tax rates.

Can job transferees who must sell their house in less than the two-year use period exclude any of the gain? Yes! They can claim a percentage equal to the amount of the two-year requirement they have satisfied. For example, six months of used and owned property is 25% of two years, of either $250,000 or $500,000 depending on their situation.

When can owners of a rental property or a home formerly used as a principal residence qualify for the exclusion if they no longer live there on the sale date? They qualify if they meet the ownership, use and waiting period tests. Also, owners of a rental property can move into their property for two years, convert the rental into a principal residence and be eligible for the exclusion.

Consult a tax expert to find out if these exclusions or other tax laws may benefit you.